Punjab-Haryana High Court
Pr Commissioner Of Income Tax 2 Chd vs Kirti Anand on 19 November, 2024
Author: Sanjeev Prakash Sharma
Bench: Sanjeev Prakash Sharma
Neutral Citation No:=2024:PHHC:151393-DB
202 IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
ITA
ITA-145-2016 (O&M)
Date of Decision: 19.11.2024
Principal Commissioner of Income Tax-2,
Tax 2, Chandigarh ...Appellant
Vs.
Shri Kirti Anand ...Respondent
CORAM: HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA
HON'BLE MR. JUSTICE SANJAY VASHISTH
Present: Mr. Yogesh Putney, Sr. Standing Counsel along with
Mr. Vaibhav Gupta, Sr. Standing Counsel for the appellant.
Mr. Divya Suri, Advocate for the respondent.
***
SANJEEV PRAKASH SHARMA, J.(Oral)
1. The revenue assails the order passed by the Income Tax
Appellate Tribunal (for short 'the ITAT') dated 14.10.2015, whereby the
appeal filed by the assessee was allowed and order passed by the
Commissioner of Income Tax-II,
Tax II, Chandigarh dated 21.03.2013, was set aside
and the order of assessment passed by the Assessing Officer dated
16.12.2010, was restored.
2. Learned counsel for the appellant submits that order was passed
by the CIT-II,
II, Chandigarh, under Section 263 of the Income Tax Act, 1961
and the basiss for passing of the said order was that after the assessment
proceedings were conducted by the Assessing Officer, the audit objections
were raised and it was pointed out in the objections that the inquiry was not
conducted as required by the concerned Ass
Assessing
essing Officer relating to the
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ownership and entitlement of the cars and houses which were said to be the
alleged source of income for investment in the mutual funds amounting to
Rs.58.30 Lakh approximately.
3. While admitting this appeal, the following question of law was
framed on 03.10.2016:-
Whether on the facts and in the circumstances of the case and in
law, the Hon'ble ITAT was right in quashing the order passed
under Section 263 of the Income Tax Act, 1961, by the Pr.
Commissioner of Income Tax directing the AO to pass an order
afresh after making necessary inquiries in accordance with law
after keeping in view the observations made and allowing
opportunity of bearing heard to the assessee on the finding that
the assessee had failed to explain the issue with cogent evidence
and the Assessing Officer had failed t make relevant enquiries in
respect of such issues."
4. To answer the said question, learned counsel for the appellant
submits that the ITAT has fallen in error in interpretation of law relating to
the scope of inquiry under Section 263 of the Act and submits that the
explanation under Section 263 of the Act defines 'record' which means all
record relating to any proceedings under the Act available at the time of
examination by the Commissioner. The commissioner, therefore, has
absolute power to examine the record of the proceedings to reach at the
conclusion as to whether the order of the Assessing Officer is erroneous and
secondly has been prejudicial to the interest of the revenue. For reaching to a
conclusion as to whether the order is erroneous, the CIT can also look into
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the objections raised by the audit and if they are found to be valid, the order
of the Assessing Officer would have to be held as erroneous.
5. We have carefully considered the submissions as above and we
find that Section 263 of the Act, provides as under:-
263. Revision of orders prejudicial to revenue.
(1)The [Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner] or Commissioner may call for and
examine the record of any proceeding under this Act, and if he
considers that any order passed therein by the Assessing Officer
[or the Transfer Pricing Officer, as the case may be,] is
erroneous in so far as it is prejudicial to the interests of the
revenue, he may, after giving the assessee an opportunity of
being heard and after making or causing to be made such
inquiry as he deems necessary, pass such order thereon as the
circumstances of the case justify, [including]--
(i)an order enhancing or modifying the assessment or cancelling
the assessment and directing a fresh assessment; or
(ii)an order modifying the order under section 92CA; or
(iii)an order cancelling the order under section 92CA and
directing a fresh order under the said section].
Explanation 1.--For the removal of doubts, it is hereby declared
that, for the purposes of this sub-section,--
(a)an order passed on or before or after the 1st day of June,
1988] by the Assessing Officer [or the Transfer Pricing Officer,
as the case may be,] shall include--
(i)an order of assessment made by the Assistant
Commissioner or Deputy Commissioner or the Income-tax
Officer on the basis of the directions issued by the Joint
Commissioner under section 144A;
(ii)an order made by the Joint Commissioner in exercise
of the powers or in the performance of the functions of an
Assessing Officer [or the Transfer Pricing Officer, as the
case may be,] conferred on, or assigned to, him under the
orders or directions issued by the Board or by the
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Principal Chief Commissioner or Chief Commissioner or
Principal Director General or Director General or
Principal Commissioner or Commissioner authorised by
the Board in this behalf under section 120;
[(iii) an order under section 92CA by the Transfer Pricing
Officer;]
(b)"record" shall include and shall be deemed always to have
included all records relating to any proceeding under this Act
available at the time of examination by the Principal [Chief
Commissioner or Chief Commissioner or Principal]
Commissioner or Commissioner;
(c)where any order referred to in this sub-section and passed by
the Assessing Officer 92[or the Transfer Pricing Officer, as the
case may be,] had been the subject matter of any appeal filed on
or before or after the 1st day of June, 1988, the powers of the*
Principal Commissioner or Commissioner under this sub-
section shall extend and shall be deemed always to have
extended to such matters as had not been considered and
decided in such appeal.
Explanation 2.--For the purposes of this section, it is hereby
declared that an order passed by the Assessing Officer [or the
Transfer Pricing Officer, as the case may be,] shall be deemed
to be erroneous in so far as it is prejudicial to the interests of the
revenue, if, in the opinion of the Principal [Chief Commissioner
or Chief Commissioner or Principal] Commissioner or
Commissioner,--
(a)the order is passed without making inquiries or verification
which should have been made;
(b)the order is passed allowing any relief without inquiring into
the claim;
(c)the order has not been made in accordance with any order,
direction or instruction issued by the Board under section 119;
or
(d)the order has not been passed in accordance with any
decision which is prejudicial to the assessee, rendered by the
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jurisdictional High Court or Supreme Court in the case of the
assessee or any other person.
[Explanation 3.--For the purposes of this section, "Transfer
Pricing Officer" shall have the same meaning as assigned to it
in the Explanation to section 92CA.]
(2)No order shall be made under sub-section (1) after the expiry
of two years from the end of the financial year in which the
order sought to be revised was passed.
(3)Notwithstanding anything contained in sub-section (2), an
order in revision under this section may be passed at any time in
the case of an order which has been passed in consequence of,
or to give effect to, any finding or direction contained in an
order of the Appellate Tribunal, National Tax Tribunal, the High
Court or the Supreme Court.
Explanation.--In computing the period of limitation for the
purposes of sub-section (2), the time taken in giving an
opportunity to the assessee to be reheard under the proviso to
section 129 and any period during which any proceeding under
this section is stayed by an order or injunction of any court shall
be excluded.
6. Thus, the sine-qua non for interference by the CIT under Section
263 of the Act to the assessment order passed by the Assessing Officer is of
satisfaction of certain conditions as noticed above i.e. that the order passed by
Assessing Officer is erroneous and secondly that the order results in
prejudice to the revenue.
7. In the present case, it is an admitted position that after the
assessment order was passed, audit objections were raised with regard to
inquiry said to have been conducted by the Assessing Officer and the audit -
party recorded several major audit objections with respect to the investment
made by the assessee in mutual funds/shares. There was no verification done
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by the Assessing Officer during the assessment proceedings relating to the
explanation to be forwarded by the assessee.
8. We, therefore, are satisfied that the order passed by the CIT
under Section 263 of the Act in the facts and circumstances of the case
cannot be said to be such which was to be interfered with by the ITAT. The
view taken by the ITAT based on the judgment passed by the Hon'ble
Guhawati High Court in B & A Plantation and Industries Ltd. and
another vs. CIT and others 2007 (290) ITR 395, cannot be said to be
correct interpretation of Section 263 of the Act and the record relating to any
proceedings under the Act available at the time of examination by the
Commissioner would also include the audit objections. In CIT vs. P.V.S.
Beedies Pvt. Ltd. 1998 (9) SCC 272 the Hon'ble Apex Court held as under:-
"2. We have considered the matter. It appears that the reopen-
ing was done because in the original assessment donations made
to a body known as P.V.S. Memorial Charitable Trust was held
by the Income Tax Officer to be eligible for deduction under
Section 80G. But subsequently it was pointed out by the internal
audit party that the recognition which had been granted to the
P.V.S. Memorial Charitable Trust had expired on 22-9-1972.
That means it had expired before 1-4-1973. Therefore, in the re-
levant years of account this Trust was not a recognised charita-
ble trust. In that view of the matter the donation to P.V.S. Me-
morial Charitable Trust did not qualify for deduction under Sec-
tion 80G as a donation made to a recognised charity.
3. We are of the view that both the Tribunal and the High Court
were in error in holding that the information given by internal
audit party could not be treated as information within the mean-
ing of Section 147(b) of the Income Tax Act. The audit party has
merely pointed out a fact which has been overlooked by the In-
come Tax Officer in the assessment. The fact that the recognition
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granted to this charitable trust had expired on 22-9-1992 was
not noticed by the Income Tax Officer. This is not a case of in-
formation on a question of law. The dispute as to whether reo-
pening is permissible after audit party expresses an opinion on a
question of law is now being considered by a larger Bench of
this Court. There can be no dispute that the audit party is en-
titled to point out a factual error or omission in the assessment.
Reopening of the case on the basis of a factual error pointed out
by the audit party is permissible under law. In view of that we
hold that reopening of the case under Section 147(b) in the facts
of this case was on the basis of factual information given by the
internal audit party and was valid in law. The judgment under
appeal is set aside to this extent.
4. The appeals are allowed. There will be no order as to costs."
9. In view of the above, the question framed is decided in favour of
the revenue.
10. At this stage, learned counsel for the assessee submits that after
the order was passed under Section 263 of the Act, the Assessing Officer has
again passed another order under Section 143(3) of the Act and has made
certain additions. The subsequent order was passed by the Assessing Officer
dated 28.01.2014, was challenged before the CIT (Appeals-2) in Appeal
No.702/13-14. The same was decided by the CIT (A) on 19.12.2014,
whereby certain additions were deleted. The revenue further challenged the
order of CIT (A) before the Income Tax Appellate Tribunal and cross-
objections were also filed by the assessee. The same was decided on
15.12.2015, whereby the departmental appeal as well as cross-objections
were disposed of on the basis of order passed by the ITAT dated 14.10.2014,
which is impugned in the present appeal.
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11. Since, we have already set aside the order passed by the ITAT
dated 14.10.2014, by answering the question in favour of the revenue as
above, the order passed by the ITAT dated 15.12.2015 will also have to be
necessarily set aside and the ITA-214/CHD/2015 along with CO
No.9/CHD/2015, are restored for fresh adjudication by the ITAT. The ITAT
is now directed to examine the said appeal independently on what we have
already passed an order including examining the tax effect also.
12, Appeal allowed in the aforesaid terms.
13. All pending misc. application(s) also stand disposed of.
(SANJEEV PRAKASH SHARMA)
JUDGE
(SANJAY VASHISTH)
JUDGE
19.11.2024
rajesh
1. Whether speaking/reasoned? : Yes/No
2. Whether reportable? : Yes/No
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